March 1, 1998, Bechtel Submits a Franc?denominated Bid on a Project

question 2

Multiple Choice

March 1, 1998, Bechtel submits a franc?denominated bid on a project in France. Bechtel will not learn until June 1 whether it has won the contract. What is the most appropriate way for Bechtel to manage the exchange risk on this contract?

• A) sell the franc amount of the bid forward for U.S. dollars
• B) buy French francs forward in the amount of the contract
• C) buy a put option on francs in the amount of the franc exposure
• D) sell a call option on francs in the amount of franc exposure

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Definitions:

White Matter

Bundles of parallel axons with their associated sheath in the central nervous system.

Cerebral Hemispheres

The two halves of the brain, divided into left and right sides, responsible for controlling different functions and cognitive processes.

Commissural Fibers

Axonal connections between the hemispheres of the brain, facilitating communication.

Hemispheres

The two halves of the brain, each specializing in different functions but working together to process information.